Global dealmakers: European M&A market update 2020
The world certainly has changed since our ‘Global dealmakers: Cross-border M&A outlook 2019’ report released last October. Then, the US-China trade war and Brexit were the top concerns for dealmakers. Many were using M&A in response to tariffs and trade barriers arising between major economic powers in North America, Europe and Asia. Still others, were using crossborder M&A to mitigate risks from geopolitical uncertainty and the rising threat of protectionism.
This was especially true of M&A in Europe, where dealmakers have been dealing with the challenges of geopolitics and economic uncertainty for several years, not to mention the shape and nature of business in the EU following the UK’s planned departure. The impact of these events on M&A has been apparent: deals declined 5% in 2019 from the year before, with values dropping 21%. In the first quarter of 2020, deals dropped 33% from Q1 2019, although values went up 26% given several large cap transactions this year. Since Q4 2019, however, deals declined 36% in volume and 5% in value.
Now a new threat has arisen: pandemic and the ongoing spread of Covid-19. The uncertainty around this new challenge has shaken markets and populations globally, sending a crushing blow to stocks, corporate confidence and population centers worldwide. Europe has been particularly impacted as governments impose measures to stop the spread, with Italy and Spain suffering the brunt of European cases of the virus.
It remains to be seen what kind of impact Covid-19 will have on dealmaking in Europe and globally. However, attitudes have shifted regarding the onset of recession regionally and globally. Now, as governments around the world push stimulus measures and execute strategies in response to what has become a global health crisis, it has quickly become a question of “When will the recession be over”, as opposed to “When will the recession hit?” Covid-19 and each government’s response is also likely to drive some of the trends emerging in Europe, such as protectionism.
Following up from our global research in October 2019, we returned to the market to ask questions about investment intentions and views on M&A in Europe. Their feedback has helped paint a vivid picture of the trends and challenges shaping the region and markets where opportunities are waiting to be discovered.